Adding Equity To The Home
One of the best ways to add equity to a property is through renovations. Many UK properties have expanded as much as possible, so the homeowners are renovating the basement and extending the top of the house up, in an effort to find more space, and improve the value of their home.
When done right, this can substantially increase the value of a home, but when done wrong, it may not even cover the cost of the mortgage or secured loan needed to finance the renovations when the house is sold.
When moving down, there are certain rooms that will increase a home’s value. An in-home theatre, complete with theatre seats, will increase a home’s equity far beyond the initial investment, including the interest paid on the loan, but for most homeowners, this is a millionaire’s dream. Perversely, adding another bedroom can barely increase a home’s value. In fact, in some areas, it may be a complete waste of time as the space lost or diminished room sizes are seen as a negative point to buyers.
The same goes when moving up. Adding a recreation room at the top of the house is not as desirable as adding a luxury master suite complete with walk in dressing room, wall to wall windows, ceiling lights, and state of the art bathrooms.
The important consideration needs to be whether to go ultra modern, or reproduce a standing classic in the architecture and the décor. Simply adding a room is not the objective.
Equity is added when a renovation gives people an increased standard of living and luxury they will not find elsewhere in the neighbourhood. Always consider how much money is being borrowed. Many people borrow a second mortgage for the amount they can afford. Waiting a few months, and borrowing a loan large enough to create a room you’ll love can make all the difference in a house’s value.